Monday, August 20, 2012

The Paradox of Patents

A theme of my scholarship can be called the paradox of patents. As Louis Kaplow explained, a central premise—I would say the central premise—of the patent system is that judges cannot discern the social value of an invention on a case-by-case basis. If they could, there would be no need for patents: a taxpayer-funded prize system would be more efficient.

But, virtually every doctrine of patent law involves judges making surreptitious judgments about the social value of an invention on a case-by-case basis. Much of my early work was to establish this point. This is true of patentable subject matter (abstract ideas), patent validity (nonobviousness), patent scope (enablement and claim construction), and patent remedies (so manifest that I never got around to writing the article). Indeed, most of these doctrines are both positively incoherent and normatively unjustifiable unless we understand judges to be making intuitive economic judgments about the social value of the invention at issue.

I have no really good answer to resolving this paradox. I have suggested some mechanisms that overcome the problem to some extent, but a general solution eludes me. The more important point is that I think this is a dilemma that has often been ignored by other patent scholars as well. The patent literature is filled with calls for more transparent case-by-case analysis of the economic costs and benefits of a particular patent; and of course I prefer having a transparent economic analysis over a sub rosa economic analysis. But I have yet to see a really convincing analysis of why such case-by-case economic balancing doesn’t undermine the basic premise of having a patent system at all.

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It's been a while since I have written in the patent law area, but my impression is that Congress's requirements of patentability try to identify general features that will generally identify socially useful inventions. The basic concept of the patent system is that of a unilateral contract offer: By promising a patent to a person who comes up with an invention that satisfies the general requirements of patentabililty, Congress induces the creation, application, and disclosure of socially useful inventions. That system requires relative certainty in order to induce that investment in research and that disclosure by potential inventors. The problem with ex post case-by-case economic balancing is that it causes significant uncertainty ex ante, and it's the ex ante incentive that the patent system is based on. That's my sense, at least.

Posted by: Orin Kerr | Aug 20, 2012 10:42:19 AM

I'd be interested in what you think about Philip Mirowski's view that "A patent, far from being a license to invent, is rather a state-granted right to sue others if they make, use, sell, offer, import, or (even!) offer to import the entity covered by the patent. [....] The fact that this has nothing whatsoever to do with the actual process of discovery is demonstrated by the fact that independent innovation of the same 'thing' is no defense against litigation. Because it is only a right to sue, there are no 'patent cops:' The full weight of discovery and punishment rests on the patent holder, and this must be pursued through special courts in the United States, something that lends the entire field a very skewed legal structure." He points out that the "'thing' produced has to meet certain tests to initally be granted this right by the the U.S. Patent Office (USPTO) nominally categorized under the rubrics of allowable subject matter, utility, novelty, and nonobviousness. ....[And] it is important to note that the tests themselves have been substantially revised (and many would say gutted) in the last few decades." These changes allowed for the patentability of biological organisms under the ostensible claim that they were in fact "human-made."

Mirowski explains how "the lowering of the bar for patentability of organisms and the transformation of from the Cold War into the privatized regime [what John Ziman calls post-academic] science are intimately linked." "[E]qually significant for science," he argues, were the "easing of restrictions of patenting computer code, mathematical algorithms and business practices, to such an extent that the patent system has come dangerously close to allowing the patenting of ideas themselves, _particularly when those ideas arise in scientific research_." Academic scientists themselves, in their role as aggressive entrepenuers, have sought to capitalize on their scientific discoveries through the patent system, extending patents to embrace scientific "facts" (including methods used in discovery of said facts). A major ambition of neoliberal doctrine (which is coherent, even if repugnant) is to privatize much of what is now under the stewardship and regulation of government, thus a Congress that imbibes this doctrine treats the Patent Office as a "cash cow" whose principal function is to enable customers get patents: "Once the Patent Office was treated as a money-spinner, all the incentives were skewed for examiners to allow patents, rather than to reject them." It seems the USTPO is structurally crippled when it comes to the exercise of "some discretionary control over the patnet system," which hardly bodes well for the legal system generally and judges adjudicating these matters in particular:

"The whole process has become so profitable that the 1990s saw the rise of the 'patent troll,' and individual or firm who accumulates patent portfolios solely for the purpose of pursuing infringement suits, without having any intention to actually 'work' any of the patents or produce anything. Neoliberals actually promote this phenomenon as one more instantiation of their precept that any apparent 'market failure' can be rectified by instituting another [Jeff Lipshaw take note!] meta-market: In this case, venture capital flows in to start-up firms to serve as patent retailers and even introduce derivatives." This is the beloved marketplace of ideas with a vengeance, one that crowds out any meaningful conception of the "public interest," let alone the common good. Universities themselves have become envious corporate pioneers of these new models of patent ownership, yet another conduit of the marketplace of ideas suffusing the ethos of the entire society. Idealistic and innocent scientists have long labored under the illusion that as long as they are engaged in scientific research, they're exempted from patent infringement. We can speak of true incoherence when it comes to the patent system's articulation of research exemptions. For the rest, please see Mirowski's Science-Mart: Privatizing American Science (2011).

Incidentally, I still contend that for a cluster of (legal or otherwise) propositions to deserve the appellation "doctrine" means that they cannot be described as incoherent in toto, only more or less "coherent." However, the relation between the doctrines may be incoherent. Of course a coherent doctrine may, in time, become irrelevant, moribund, what have you, but that has no bearing on the doctine's coherence as such, indeed, that coherence enables us to arrive at such judgments.

Orin, I agree with your characterization that "Congress's requirements of patentability try to identify general features that will generally identify socially useful inventions." The problem, I think, is that they are so rough that courts cannot help but try and complete the picture by engaging in case-by-case economic balancing. And case-by-case economic balancing is something that the system was predicated on courts not doing.

Patrick, I have little disagreement with the characterization that a patent is a "right to sue." I tell that to my students every year in my patent class. I don't think it necessarily follows that the patent system is terrible. Virtually every legal right is backed up to some extent by private enforcement. I certainty do not think having criminal patent infringement a la criminal copyright infringement would be an improvement to the system.

I'm also inclined to agree that the patent system is out of whack and overall too favorable to patent holders. But I don't think this has anything to do with the reliance on private enforcement. Over 200 years, we have had periods when the patent system was distinctly favorable to patent holders (now), and when it was distinctly unfavorable to patent holders ("the only valid patent is one which this Court has not been able to get its hands on"). So I think that is something that is tangential to my point about judicial economic balancing.

Posted by: TJ | Aug 20, 2012 3:32:48 PM

"a taxpayer-funded prize system would be more efficient."

It probably would be in this day and age. And it certainly would be in this day and age for some things.

But remember Prof, the government wants disclosures that will advance the Useful Arts and I don't think they want to levy a directly visible tax on people to fund getting such, so they use the indirect tax on companies (that ultimately gets passed to the consumer) via the patent system.